Unusual Options Activity Review (F, EBAY, NOK, BKC, PALM, XLNX, ALTR, UPS)

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Sentiment
Trading remained choppy and the major averages were modestly lower late-Thursday. Stock index futures moved higher early, as better-than-expected earnings from Apple Computer (AAPL), Ebay (EBAY), ConocoPhillips (COP), Fifth Third (FITB), and a handful of others helped lift sentiment before the exchanges opened for trading in New York. The Dow Jones Industrial Average opened with modest gains.

The early advance stalled, however, after a report on existing home sales showed a bigger-than-expected drop in March. The data, released 30 minutes into the trading session, showed home sales falling to an annualized rate of 4.57 million in March, down from 4.71 million the month before and below economics expectations of 4.65 million.

There was a lot of back-and-forth action, but not much movement one way or the other. The Dow Jones Industrial Average traded in a narrow 142-point range and was down 5 points heading into the final 45 minutes of trading. Investors were awaiting earnings from Amazon.com (AMZN) and Microsoft (MSFT) after the bell. Durable goods and home sales data are due out toay. The highly-anticipated results from the banking industry "stress tests" will be in focus Friday as well.

In the options market, the CBOE Volatility Index (.VIX) edged down .43 to 37.67and volume was light, with approximately 6 million calls and 5.3 million puts traded by late session.




Unusual Options Activity

• Ford Motor (F) options volume was running 2X the usual. 182,000 contracts traded and put volume accounts for 55 percent of the activity Thursday.

• Options activity in Ebay (EBAY) rose to 5X the usual, with 122,000 contracts traded and call volume representing 55 percent of the action.

• Nokia (NOK) options activity was running 3X the usual. 91,000 contracts traded and put volume accounting for 95 percent of the day's activity.

Increasing volume was also seen in Amazon.com (AMZN), Etrade Financial (ETFC), and Regions Financial (RF).


Bullish Flow

• Some investors were hungry for Burger King (BKC) calls midday Thursday. Shares were up 74 cents to $18.74 and total options volume was running 4X the average daily. Most of the activity was in June 17.5 and June 20 calls, with 4100 contracts traded and about 95 percent hitting ask-side. Looks like some investors were buying to open. The bullish trading comes after McDonald's (MCD) and Yum Brands (YUM) posted better than expected earnings this week, and ahead of BK's earnings on April 29.
  

• Palm (PALM) was down 33 cents to $10.03 and options were actively traded on talk the company could debut its new Pre phone with a $150 price tag within weeks (Story link on web site.) Analysts expect the subsidized price for Palm Pre to be around $199, but it could be as low as $150 if Sprint decides to sweeten the offer. In the options, PALM volume was running 3X the usual, with May 10 calls leading the order flow. 8,100 traded. Meanwhile, it looks like sellers dominated the action in May 10 puts.

Bearish Flow

• Semiconductor equipment makers Xilinx (XLNX) and Altera (ALTR) were seeing increasing put volume Thursday. XLNX hit a high around $22 after reporting better-than-expected earnings late Wednesday. Co. reported 26 cents per share, and 8 cents better than Street estimates. Shares came under pressure midday, however, and were  down $1.60 to $19.22. In the options, volume was running 3X the usual, with 16,000 puts and 5,200 calls traded. Altera was seeing similar action. Shares were down 92 cents to $15.83. 10000 ALTR puts and 2500 calls traded.
  

• UPS (UPS) was seeing increasing put volume for a 2nd time in less than a week. A large buyer of May 55 puts surfaced on April 17. Thursday, shares were down $1.85 to $52.90 after UPS delivered a disappointing earnings report. Co posted 52 cents per share, four cents below estimates, and guided second quarter numbers to between 45 and 55 cents, well below the 65-cent consensus. In the options, volume was running 2X the usual. The top trade: 4,165 May 50 puts for $1.25 on the ISE, an opening customer put buyer. 18.5K contracts traded by late session.

Implied Volatility Movers

• Ebay (EBAY) was up $1.37 to $16.15 and implied volatility was falling after the company reported quarterly earnings of 39 cents per share, which topped Street estimates by a nickel. Implied volatility was back down to 45, from about 55 the day before.

Implied volatility was also lower in:

• Apple Computer (AAPL)
• Fifth Third (FITB)
• ConocoPhillips (COP).

Meanwhile, implied volatility was higher in:

• Altera (ALTR)
• US Steel (X)
• Allergan (AGN).

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